Investors Run to U.S. Treasury Bonds for Safety!

Between lousy U.S. data and the lingering risks in Greece and China, bond prices have been rallying as investors turn to them for safety. And that means yields are falling.

As far as Greece goes, political pressure seems to have forced its leaders to swallow an austerity package it can’t chew. Sure, it’ll allow them to remain in the euro – not to mention keep their banks open. But ultimately this will cause its economy to sink even deeper into a hole. I guess that’s tomorrow’s problem.

And then there’s China. It seems the land of the grand illusion will go to any length to manage (or manipulate) its economy, people, currency and stock market – like injecting nearly half a trillion dollars to prop up stocks, momentarily forbidding short-selling and large investor selling, creating new margin rules, and generally halting trades on stocks in danger of going lower. I’m sure that’ll end just as well as Greece.

As a side note, I would hate to be John Del Vecchio’s counterpart in China. If you found an equally skilled short-seller there, he might be put in front of a firing squad!

Then back home in the U.S., economic data’s been a mixed bag.

Retail sales from June were dismal.

Inflation from June was as expected, but still too low to celebrate.

And housing starts came in stronger than expected, but that’s due to gains in multi-family units – i.e., rentals. Not single family houses, which spend a heck of a lot more than renters.

So, there’s really no reason to break out the champagne.

Overall, U.S. data was negative. China and Greece still represent danger to the markets. And bond prices are recovering while yields are going lower.

All of this bad news is actually good news for Dent Digest Trader subscribers. This assortment of poor economic data will undoubtedly force interest rates to move, and bond traders like them will be able to profit from the trend lower. You can join this exclusive group of traders here to get in on the action.

Lance Gaitan

Lance Gaitan
Editor, Dent Digest Trader

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Categories: Interest Rates

About Author

Lance Gaitan graduated from Franklin University in Columbus, OH with a degree in Finance. After graduating and working as an auditor for an insurance administrator as a number of years, he attained his securities license. He then went to work as a broker for a small firm and during the mid-1990’s Lance managed the futures trading desk for Piper Jaffray, a large regional brokerage firm based in Minneapolis. After migrating to Florida in early 2000, Lance founded a futures trading firm, GSV Futures, specializing in retail commodity trading strategies. Lance sold that business in 2006 and joined Harry Dent, Jr. and Rodney Johnson at Dent Research shortly thereafter.